The Sydney Morning Herald has revealed the top five most common claims made against landlord insurance policies, with an unsurprising claim type topping the list.
However, the takeaway is fairly straightforward, which is for investors to understand what they are and are not covered for by careful consideration of the PDS or consulting with a broker.
Topping the list was the loss of rent, which is consistent with tenancy issues and rent payments during the pandemic. Defaulting tenants have been common throughout the last 18 months, and when coupled with damage or other issues, it can be a costly experience for landlords, especially when re-letting costs are required. This can be further compounded by untenable conditions at the property or even locks and keys needing to be changed. Most importantly, ensure it’s included in the policy because not all will have it as a standard feature.
Tenant damage, somewhat unsurprisingly, is the second most common incidence where owners make a claim. It is worth noting that it is not always deliberate or malicious damage that causes issues with the property, with accidental damage – spilling wine on furnishings, for example – being common but also costly to correct.
Water damage continues to rank highly – and this continues to make up a major share of claims as per recent industry trends. The Insurance Council of Australia noted in their letter to the government urging action on climate change, that “As Australia warms, we can expect more frequent extreme natural hazard events; more bushfires, floods, hailstorms and cyclones.
“At present no region in Australia is uninsurable. However, it is possible some regions may become difficult to insure in the future unless governments invest in appropriate physical mitigation and adaptation strategies.”
Water damage can be covered by building insurance, but when it affects the contents of the home, it is likely to fall under landlord insurance. Light fixtures, installed appliances, soft furnishings like blinds or carpets can all be affected and take time and money to fix.
It is worth noting that water damage is different from storm damage, and policies will respond differently, to say, a leaky pipe on a dishwasher versus the inundation of a building due to a storm. As with water damage, storm damage can affect soft furnishings, fixtures and appliances, so it is worth checking how your policy responds across both building and landlord insurances.
Lastly, fire rounds out the top five most common landlord insurance claims. Electrical faults, overloaded powerboards, malfunctioning appliances or even unattended candles can cause huge amounts of damage.